The offshore trend — will life sciences follow suit?

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A rash of globalization is transferring upscale jobs offshore. This is the politically charged business practice of sending high-paying jobs out of the United States and Western Europe to Eastern Europe and developing countries, where salaries are considerably lower.

For us, there are two questions: Will life sciences research, industrial or academic, follow this offshore trend? And if so, who will be the winners and the losers?

The life sciences have so far been pretty deaf to the siren song of outsourcing. In the United States and Western Europe, leaders in the political and scientific communities argue that the combination of human and intellectual capital, the quality of support and infrastructure, and the access to wealthy markets make it unthinkable that the life sciences community would join the offshore boom.

But consider other professions: Chip-design teams, engineering firms, software development companies, and financial analysis offices, among others, are leaving to employ highly skilled workers and enjoy substantial savings elsewhere. An estimated 3 million US white-collar jobs alone are slated to relocate to developing countries. I suspect that the life sciences will go the same way, sooner or later.

Security changes that make the United States less attractive as a long-term residence to foreign researchers is one factor that could propel an offshore movement sooner rather than later. And the billions of dollars that countries such as China are dangling in front of native researchers who've gone overseas is another. Add to this the fact that many countries have education standards that rival or better the United States, potentially providing a secure pipeline of cheap local talent, and the case is looking strong.

Biotech could be the first to go. In a recent survey of a biotech sister industry, software development, 95 per cent of companies said they will operate offshore by 2006. If talented lab scientists demanding US$100,000 in the San Francisco Bay Area can be hired for US$10,000 in Russia or China, don't be surprised if biotechs make a move soon. Some in the Bay Area are already itching to go. [1]

The case for large pharmaceutical companies is more ambiguous. In a near-reversal of the offshore trend, European drug makers are coming to the United States. According to a Financial Times report, [2] Big Pharma spent 50 per cent more on research in Europe than in the United States in 1990, and while R&D spending has grown on both sides of the Atlantic, by 2001 40 per cent more was being spent in the United States than in Europe. The reasons include political questions such as pricing control and taxation policy, as well as research issues such as talent availability and access to academic networks.

Intriguingly, developing countries have an active pharma industry (India, for example has as many as 20,000 companies) that currently churn out clones of the drugs produced by multinational companies. In January 2005, a new patent regime that the World Trade Organization instituted will come into force; it will, at a stroke, end this practice. But these indigenous companies have proven research and production skills, and they may tempt global pharma to participate in some offshoring contract research activity.

What of academia? Will the likes of the NIH, Max Planck Institute, Howard Hughes Medical Institute, and the Wellcome Trust be seduced by the growing possibilities of getting more research bang for their buck by going global? For government agencies, the answer will be no, as they are obliged to focus on the home research community; at most, there may be (perhaps dramatically) increased funds for international collaboration. However, not-for-profit research funders, who have fewer constraints, may be more inclined to commit a lot more funds offshore.

The life sciences community has an interesting few years ahead of it. And while I wouldn't wish an employment crisis on those of us in the developed world, the idea of an expanded global family of research surely has great appeal.

Richard Gallagher is editor of The Scientist and can be contacted at [email protected].